#TBT: The 3 Best Things About Trading Stocks
Let's get right to it! Investing, economics, and finance - they all sound like pretty boring topics to the average person. I totally get it - most of us weren't raised watching CNBC before going to school and whenever we hear the term "stock market" it doesn't usually invoke a positive reaction in today's world. But you don't have to force yourself to read The Wall Street Journal every morning or plow through an investment prospectus like it's a novel you can't put down - it's actually really fun to trade stocks. I'd like to share with you the three main things that get me most excited about the stock market and hopefully they will inspire you to think about your finances a little differently:
1) You Get to Say You're an Owner of a Company You Love
Granted you get to own a thousandth of a percent of a company you love, but who cares! When they succeed, you succeed - how awesome is that? When you have control over your own retirement and brokerage accounts, you get to pick and choose what companies go into your portfolio. Are you mad that the McRib is gone? Bye bye McDonalds (MCD). Do you eat a burrito for lunch at least once per week? Hello, Chipotle Mexican Grill (CMG). Did you experience great customer service with one airline but not another? Maybe you want Delta Air Lines (DAL) today and JetBlue (JBLU) tomorrow. Do you book your vacations through Orbitz (OWW), Priceline (PCLN), or Expedia (EXPE)? Do you own more Nike (NKE) sneakers than anyone you know? Do you have to have the new iPhone every time an upgrade is made? If you can afford that why aren't you buying stock in Apple (AAPL)?
You get the picture: you dump tons of money into these companies on an annual basis anyway - why aren't you getting rewarded for supporting the businesses you love? Own their stock!
2) The Returns Are Much Higher Than a Boring Savings Account
Interest rates on savings accounts have been near 0.0% since the recession of 2008-2009. How is that working out for you? Cash by itself gains little to nothing on an annual basis yet the rate of inflation is MUCH higher (a dollar today is worth more than a dollar in the future). Put your savings to work! To start off you need a few thousand dollars in savings, and if you don't have that put aside a little each month and don't touch it (that part is important) until you can open an IRA or a brokerage account of your own. I moved all of my savings into a Roth IRA a few years ago and a savings account would've given me an interest rate of 0.8% per year. When I buy equities I like my returns are on average over 32.0% per year. Make your money work for you today...not right before you're ready to retire.
3) You Can Influence the Kind of Change You Want to See
Gandhi once said that you have to be the change you wish to see in the world. Guess what? With the stock market you can. This is a nifty concept called "socially responsible investing," where you utilize stocks as a way of initiating social change. Millennials are soon to be the largest consumer group in the world, they are also the most contentious consumers in modern history. Their spending habits are heavily influencing the long-term success or failure of companies. Imagine what would happen if they combined spending with investing? Money talks and management listens - this is better than any protest or grassroots boycott. There are plenty of examples of this, but the main one that sticks out for me is SeaWorld (SEAS) which was riding high for years until CNN backed a documentary called "Blackfish" exposing the truth about orcas in captivity. PETA's job was suddenly made a whole lot easier and investors began pulling their money out of SEAS, customers stopped visiting their parks and the company is now on the verge of bankruptcy. Spending and investing = the power couple that will shape society for better (or worse) in the 21st Century.
This article was originally published on GradMoney back on August 12, 2015.